A Decrease in Taxes Will Have No Effect on Real

question 136

Multiple Choice

A decrease in taxes will have no effect on real GDP if

• A)people look at changes in taxes only in the present.
• B)there is no crowding out.
• C)the Ricardian equivalence theorem holds.
• D)the tax decrease is offset by an increase in government spending.

---

Definitions:

Work in Process Inventory

Items or materials that are partially completed in the production process, representing a company's unfinished goods.

Direct Materials

Raw materials that can be directly identified with the production of finished goods in a manufacturing process.

Direct Labor

Direct labor refers to the wages paid to workers directly involved in the production of goods or the delivery of services.

Factory Overhead

Costs associated with operating a factory that are not directly tied to a specific unit of production, such as maintenance, utilities, and salaries of supervisors.